Deciding Authority: The Supreme Court of India
Name of the Judges: S. Rajendra Babu & Ruma Pal
Date of Judgement: 06/02/2002
Facts: An agreement was entered into between the appellant and the respondent by which the respondents undertook the construction of residential flats. The agreement contained an arbitration clause. After the completion of the work, disputes arose between the parties. The disputes were referred to a panel of three arbitrators under the provisions of the Arbitration Act, 1940 ( referred to as the Act) . By an award made on 31st December 1987 the arbitrators directed the appellant to pay the respondents various amounts towards the several heads of claim put forward by the respondents. The arbitrators also awarded interest in respect of certain of the respondents’ claims. The award was filed in the local Court which issued notice under Section 14 (1) of the Act, to the appellant. The appellant filed an application challenging the award on several grounds, one of the grounds being that the award of interest pendente lite was illegal. The respondents also filed an application in which the first prayer was to pass a decree in terms of the award. The second prayer was to: ” “Grant interest at 18% per annum on the amounts due under the decree to be so passed from the date of decree till date of payment or realization, in accordance with Section 29 of the Arbitration Act.” Both the applications were heard and disposed of by a common judgment on 26th March 1990 by which the appellant’s application was dismissed and the respondents’ application was allowed and a decree in terms of the award was granted. Soon after this an application was made under Section 114 of the Code of Civil Procedure by the respondents before the Court praying for review of the order dated 26th March 1990 . According to the respondents’ application, by an “accidental slip, omission or oversight” the Court while allowing the respondents’ application “had not dealt with and passed any order on Prayer No.2 therein for the grant of future interest at 18% per annum on the amounts due under the decree from the date of decree till date of payment or realisation”. The application was dismissed by the Court on 29th October 1990. It was held on a construction of the order dated 26th March 1990 that it was not a case of any “omission or slip” but that the Court had chosen not to grant any interest to the respondents on the decretal amount. However, on 10th December 1990, the appellant preferred an appeal from the order dated 26th March 1990 before the High Court. The appeal was allowed to the extent that the award of interest pendente lite was set aside, but the High Court refused to set aside the award on merits. Consequently, the High Court confirmed the decree of the Court below with the modification that the interest granted for the period covering the pendency of the arbitration was deleted. The appellant sought to challenge the refusal of the High Court to set aside the award on merits before this Court by way of a special leave petition.
Judgement: The argument may have had some substance had the scope of the decree not been put in issue between parties by the respondents themselves. The Court before which the application was made could have said that the grant of interest was implicit in the order dated 26th March 1990 and that by affirming the award, future interest had been granted. It did not say so. It said categorically that the prayer for future interest or interest on the decree had been considered and had been refused by the Court. When the High Court affirmed the decree in 1991, the decree had already been interpreted – an interpretation which was not questioned. In the light of State of Orissa v. B.N. Agarwalla 1997 (2) SCC 469 the correctness of the decision may be doubtful. But the respondents accepted this interpretation of the decree. They could have challenged the interpretation but they did not. They also chose not to prefer an appeal from the decree itself. Not having adopted either course, the interpretation of the decree by the order dated 29th March 1990 was final inter parties. The High Court erred in ignoring the order dated 29th October 1990 and its effect on the rights of the parties. The issue of future interest had been raised and decided once and the respondents were barred by res judicata from reopening it.
Decision:
The appeal is allowed and the decision of the High Court is set aside.
Sudipta Bhowmick, 4th Year, KIIT School of Law.
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